Wall Street’s five-week rally could stall Tuesday as investors look to the impact of renewed sanctions on Russia while closely tracking Treasury bond yields ahead of tomorrow’s Fed minutes.
U.S. equity futures moved lower Tuesday, while Treasury bond yields steadied and the dollar gave back recent gains against its global peers, as investors continue to ride a cautious rally on Wall Street.
The S&P 500 has gained more than 16.2% since reaching its 2022 nadir on March 14, even as interest rate traders continue to bet on faster, and deeper, rate hikes from the Federal Reserve and bond markets signal recession risks with an inversion of the Treasury yield curve.
At the same time, Russia’s war on Ukraine, now in its third month, is blunting sentiment in Europe and raising prices in commodity markets around the world, with Western leaders, as well as President Joe Biden, calling for tougher sanctions and potential war crimes trials for President Vladimir Putin following the discover of mass graves and civilian executions in the Ukrainian city of Bucha.
“You saw what happened in Bucha,” Biden told reporters in Washington. “This warrants him – he is a war criminal.”
The reported atrocities in the city of Bucha, as well as ongoing discoveries of civilian executions by Russian troops in Ukraine, have accelerated calls for renewed sanctions on Russia, including an EU push to target energy exports from Moscow.
French Finance Minister Bruno Le Maire said there was “”total determination” on the part of EU nations to agree sanctions on Russia’s energy exports, with a focus likely on oil, coal and natural gas exports.
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Saudi Arabia has also boosted its crude selling prices in Asia by $4.40 per barrel, taking it to a record $9.35 per barrel over the global benchmark, for deliveries in the month o May. The U.S. increase was $2.20 per barrel.
WTI futures for May delivery were marked $1.82 higher in overnight trading at $105.10 per barrel while Brent contracts for June rose $1.74 to $109.26 per barrel.
The increasing tensions, Fed tightening cycle, decades-high inflation and crumbing consumer confidence hasn’t dented equity markets, however, and Ryan Detrick, chief market strategist at LPL Financial, notes that the S&P 500 has rallied for an average of 17 months following the last four yield curve inversions between 1988 and 2019.
The spread between 2-year and 10-year Treasury note yields was inverted by around 1 basis points in overnight trading, with 10-year notes at 2.467%, while the U.S. dollar index slipped 0.05% against a basket of its global peers to trade at $98.972
In Europe, a healthy reading for the region’s economic activity over the month of March — even amid the highest output prices on record — provided an early boost for stocks, but gains faded in-line with U.S. equity futures and the Stoxx 600 was little-changed on the session by mid-day in Frankfurt trading. Asia stocks hit a one-month high in a follow-on rally from last night’s close on Wall Street.
In the U.S., futures contracts tied to the Dow Jones Industrial Average indicating a modest 75 point opening bell gain while those linked the S&P 500 are are priced for a 10 point move to the downside. Futures linked to the tech-focused Nasdaq are looking at a 38 point opening bell dip.
Twitter (TWTR) – Get Twitter, Inc. Report shares extended gains in pre-market trading as the micro-blogging website’s newest investors, billionaire Tesla CEO Elon Musk, suggested his stake in the group will be far more ‘hands-on’ than first anticipated.
Tesla (TSLA) – Get Tesla Inc Report shares, meanwhile, edged 1% lower as authorities in Shanghai extended lockdown orders in China’s biggest city, potentially extending the closure of the carmaker’s workhorse gigafactory.
